8.3.11

Smartmatic revisited

In June 2003, the Venezuelan government bought through an intermediary, Omar Montilla Castillo, a 28% participation in a company called Bizta R&D Software C.A. for 300 million Bolivares [link]. Bizta was owned by Antonio Mugica and the late Alfredo Anzola, and was part of a consortium of companies (Smartmatic, Bizta, CANTV or SBC) contracted by Venezuela to automatise elections.

In the first quarter of 2004, SBC was granted a $121 million contract, of which $91 million went to Smartmatic & Bizta, both owned by Antonio Mugica and Alfredo Anzola. This was to be the first contract won by Smartmatic in Venezuela. Since, Smartmatic has been granted, without public tender, contracts worth, at least, $131 million by the Chavez administration.

The sudden wealth allowed Mugica and Anzola to pursue international expansion plans. In 2005, Smartmatic purchased Sequoia Voting System, for $16 million, from De la Rue. In 2006, an investigation into the purchase, and the links between Smartmatic and the Chavez regime, was launched by the Committee on Foreign Investment in the United States (CFIUS), due to an electoral fiasco in Chicago, in which both Smartmatic and Sequoia participated. Instead of submitting to the scrutiny that CFIUS probe would bring, Smartmatic decided instead to sell Sequoia, blocking further investigation into its convoluted ownership structure and shareholders.

Through bribes, misrepresentations, and fraudulent practices, Smartmatic has been contracted in the Philippines, Bolivia and Mexico. What follows is an account, and official records of the countries where Smartmatic has registered.

*Some of the links are dysfunctional due to the fact that this investigation started in 2004 | The Florida register of companies contains details of the board of directors of Smartmatic Corporation, which is formed by Antonio Mugica, Alfredo Anzola, Antonio Mugica Rivero, Roger Piñate, Antonio Mugica Sesma and Luis Feliu [1]. Its principal place of business is 1001 Broken Sound Parkway, NW, STE D, Boca Raton, FL 33487. The company's history in Venezuela dates back to seven years ago when the venture was "the Research and Development Unit of Panagroup in Venezuela" and in "2000 we realized the true impact of our technology in the growing device-networking market, and we emerged as an independent company" [2].

The Miami Herald reported on Friday May 28, 2004 [F2 EDITION]:

"A large and powerful investor in the software company that will design electronic ballots and record votes for Venezuela's new and much criticized election system is the Venezuelan government itself... Venezuela's investment in Bizta Corp., the ballot software firm, gives the government 28 percent ownership of the company it will use to help deliver voting results in future elections, including the possible recall referendum against President Hugo Chavez, according to records obtained by The Herald... Until a year ago, the Bizta Corp. was a struggling Venezuelan software company with barely a sales deal to its name, records show. Then, the Venezuelan government -- through a venture capital fund -- invested about $200,000 and bought 28 percent of it".

Further the Herald also shed light upon shareholders and registered addresses of both Smartmatic and Bizta:

Three companies will build and execute Venezuela's new touch-screen voting system. Two are incorporated in Florida, though neither does most of its business here. Smartmatic Corp., which will build the machines, incorporated in Florida in 2000 and lists its world headquarters at 6400 Congress Ave. in Boca Raton. Its president is Antonio Mugica Rivero, 30, and its vice president is Alfredo Anzola, 30. Bizta Corp.,which will provide software for the new machines, incorporated in Florida in 2001, and lists its address as 19591 Dinner Key Dr., Boca Raton, a residential property owned by Mugica's father. Mugica is listed as president, and Anzola is vice president, according to Florida records. Venezuelan records, however, indicate Anzola is president. In Caracas, Bizta shares its office with Smartmatic. CANTV, Venezuela's publicly held phone company, will provide phone lines to connect the system and election day technical support. It would have been part of any voting system selected for the elections contract.

Venezuelan journalist Orlando Ochoa Teran investigated the claims published by the Miami Herald and discovered that Venezuelan officials were behind the incorporation of Smartmatic. Vice President Jose Vicente Rangel and Venezuelan Ambassador to the USA Bernardo Alvarez Herrera are intimately related, either through long time friendship or consanguinity relationship, to the directors of Smartmatic. According to registry documents, that went missing after the Herald blew the whistle, the names associated to the company are Alfredo Anzola, Antonio Mugica and families Gabaldon-Anzola and Herrera-Oropeza [3]. The incorporation of Smartmatic took place in the Fifth Mercantile Registry, located in the ground floor of tower B in “Cubo Negro” building in Chuao, Caracas. Vice President Jose Vicente Rangel's daughter -lawyer Gisela Rangel Avalos de D'Armas was, at the time, the head of the said registry. Since March 2004 the CNE has disbursed at least $131 million to Smartmatic [4].

Who controls Smartmatic?

The findings of Orlando Ochoa did not end in a Caracas registry though. Recently he wrote for Quinto Dia another article, carrying the title of this paragraph, in which he commented upon the recent acquisition of Sequoia Voting Systems for an undisclosed amount. "With the combination of Sequoia and Smartmatic, both proven innovators with accomplished track records in either the U.S. or abroad, we are creating the first truly global leader in providing voter-verified electronic voting solutions," said Jack Blaine, President, Smartmatic [5]. Furthermore, after analyzing the minutes of a meeting held in Chicago between Cook County and Chicago's city officials with the board of Sequoia, that remained in charge after the take over, and that of Smartmatic [6], Ochoa noted that unknown Venezuelan investors, operating via proxy European ventures, could indeed be the controlling power behind Smartmatic.

Sequoia Voting Systems was the e-voting branch of De La Rue PLC, the "world 's largest commercial security printer and papermaker" [7]. De La Rue's 2005 preliminary statement reports the sale to Smartmatic thus: "following the strategic review in December 2004, we announced our intention to exit the business (added: of voting systems) by the year end and this was done through the sale of the business to Smartmatic Corporation, a US based device networking and election systems company. The business had revenues of £23.1m (2003/2004 : £44.2m) and made an operating loss of £0.2m in the year (2003/2004 : £(1.9)m)" [8, page 8]. Page 5 cites "During the second half, we also successfully completed the sale of the Sequoia Voting Systems business for a consideration of £8.7m (US$16m) resulting in an exceptional gain of £6.0m".

Following Ochoa's lead, I searched the registry of the Amsterdam Chamber of Commerce, which contains details of a venture trading under the name Smartmatic International Holding B.V., incorporated, under a different name, on March 18th 1.985. Its registered address is Naritaweg 165 Telestone 8, 1043BW Amsterdam. The company activities are described as "to purchase, develop and manage property and goods" [9]. The sole shareholder of the holding is Amola Investments N.V., which in turn was incorporated in the registry of the Chamber of Commerce of Curaçao, under number 91615. A search for Amola Investments N.V. in the register of Curaçao's Chamber of Commerce returns no results. However the incorporation number does exist in the register, containing not information related to Amola Investments N.V. but to another company by the name of Smartmatic International Group N.V. [10]. Curaçao Corporation Company N.V. [11], Netherlands Antilles Corporation Company N.V. [12] and Roger Alejandro Piñate Martinez -Vice President, Special Operations of Smartmatic Corporation [13]- are the three listed statutory and managing directors of the group. Ochoa indicated that an entry in the minutes of the meeting aforementioned describes Cook County's Commissioner Peter Silvestri [14] asking to representatives of Sequoia/Smartmatic " who owns Sequoia?" The answer came from Honorable David Orr [15]: "Smartmatic International, which is owned by a Dutch company, owns Sequoia Voting Systems. Some key investors of the said Dutch company are Venezuelans". On May 26th 2005 Cook County's Election Department informed that Sequoia was the winner of the bidding process for electronic voting equipment [16].

The Amsterdam registry shows that Smartmatic International Holding B.V.'s managing director is Trust International Management (T.I.M.) B.V.. Both companies operate from the same address. According to the register the website of T.I.M. B.V is http://citco.com [17]. Citco Group is quoted in Hedge Funds World as "the world's largest hedge fund administrator" [18], that until very recently was controlled by Switzerland's Sandoz Foundation [19]. However Citco has informed that "an investor group including the Smeets Family Trust, Citco managers, and friends of the firm has acquired a controlling interest in Citco from the Sandoz Family Foundation" [20].

The USAID, IFES, Carter Center, CNE and Smartmatic connection

In June 1998, the National Electoral Council (CNE) of Venezuela contracted the International Foundation for Election Systems IFES to renew and make recommendations regarding proposals for an automated voting system in Venezuela [21, page 27]. IFES has been awarded (award number AEP-I-00-00-00007-00) [link], an "indefinite quantity contract" (IQC) by USAID with the following purpose:

"To support the transition to, and consolidation of, democratic governments through which citizens choose their leaders and participate in all levels of political decision-making, particularly in transition and sustainable development countries" [22, page 30].

According to Carter Center's America's Programme director Jennifer McCoy "President Carter had traveled several times to Venezuela, including monitoring the 1998 and 2000 elections, and he and President Chavez built avery good personal relationship" [23]. Such warm relationship may have come about due to the fact that the Carter Center is the sole subcontractor of IFES for the aforementioned purpose.

CNE's director Jorge Rodriguez traveled to Smartmatic's “factory” in Italy, early in 2004, to check the progress of the production of the electronic voting machines. These were purchased to Tecnost Sistemi Olivetti for $57.968.040. However Italian news agency ANSA posted on the economy section on April 15, 2004 that the total amount of the contract was over $24 million:

20.000 AES300 machines were bought to Olivetti, however the Italian firm does not have such a model in its catalog of products but one called MAEL 205, which was designed to play lottery. Ochoa noted that the said machines produced by Olivetti were sold to Peru, India and Tunisia not for electoral purposes [24]. Smartmatic did not fulfill the CNE's criteria in terms of experience in organization and conduction of electoral processes. This obstacle however, was circumvented by hiring Jorge Tirado, former contractor of IFES and director of Caribbean Government Consultants (CGC):

Jorge Tirado, president of CGC, has been consultant for the State Electoral Commission of Puerto Rico since1975. He has participated in more than 63 electoral processes as consultant or as head of CGC, leading technological initiatives and process lines to ensure transparent elections [25].

El Universal reported that Tirado had indeed participated in 63 electoral processes, not in the condition of organizer but as an observer contracted by IFES [26], organization with which he has an old relationship [27].

Smartmatic enters the US electoral market

In 2006, Smartmatic, in partnership with Sequoia, participated in Cook County's elections in Chicago. The process was deemed a disaster by officials, who went on to argue that electronic voting machines had not performed adequately. Smartmatic flew 15 Venezuelans to Chicago to oversee and monitor the process, in violation to US labor and immigration laws. The attention this development generated prompted a series of official probes in Chicago. However the most important was one initiated by the Committee on Foreign Investment in the United States, or CFIUS, at the request of Congresswoman Carolyn Maloney [28]. In May 2006 Rep. Carolyn Maloney (NY-14), wrote to the Department of Treasury to ask if the Committee on Foreign Investment in the United States (CFIUS) had reviewed the Smartmatic deal to buy Sequoia, which they had not. Unwilling to submit to CFIUS scrutiny, Smartmatic announced disposal of Sequoia [link].

A ruling, dated 4 April 2008, from the Court of Chancery of the State of Delaware demonstratedthere was far more to the selling of Sequoia than what was said. The ruling starts with:

“This litigation centers on the terms of a stock purchase agreement (the “SPA”) under which SVS Holdings, Inc. acquired 100% of the issued shares of stock of Sequoia Voting Systems, Inc. (“SVS”) from Smartmatic Corporation.1 In exchange, SVS gave Smartmatic a $2 million unsecured promissory note (the “Note”). The SPA expressly allows Smartmatic to sell the Note to a third party, provided that Smartmatic gives SVS notice of the sale via a “Sale Notice,” defined as a written bona fide offer stating the terms and conditions upon which the purchase is to be made, and offers SVS 60 days to match.” [29].

Smartmatic found in Hart Intercivic, America's 4th largest voting machine vendor, an interested party for its Sequoia Voting Systems stock, allegedly America's 3rd largest voting machine vendor. Hart then launched a hostile take over of Sequoia, according to an investigative report published by The BRAD BLOG [30].

All the while Chicago's Alderman Edward M. Burke kept trying to unravel who was behind Smartmatic and Sequoia. On 11 January 2008 Burke sent a letter to Mr Langdon D. Neal, Chairman of the Chicago board of Election Commissioners, requesting the following information [31]:

• Who are the owners of Sequoia and what were the terms of the management-led buyout announced?

• Please provide all copies of shareholders registries and beneficial owners of Sequoia.

• Please provide a list of the 10 largest present creditors of Sequoia and/or its affiliates.

• Do Sequoia machines used in Cook County use any software which was supplied by Smartmatic and/or its affiliates?

• Are Sequoia and/or its affiliates party to any agreements and/or contract with Smartmatic and/or its affiliates?

• Are Sequoia and/or its affiliates party to any agreements with the Government of Venezuela, any departments and/or subdivisions of the Government of Venezuela and/or any entities controlled by the Government of Venezuela?

• Please provide a list of directors and executive officer of Sequoia.

• Please rovide a list of any present employees and/or contractors of Sequoia who were at any time directly employed by Smartmatic. Were any of the present managers and/or owners of Sequoia at any point affiliated with Smartmatic, and if so, how?

• Please provide a list of any lobbyists who have worked on behalf of Sequoia in Illinois.

• To the extent any of the above materials have not been provided by Sequoia to your office, please request from Sequoia and review them. Please also provide a copy of any reports and reviews which were prepared by your office regarding your office's vetting of Sequoia as part of the hiring of Sequoia to supply electronic voting machines to be used by voters in the City of Chicago. Burke's pertinent questions are to be commended. Further, publicly available evidence shows that Jack Blaine, Sequoia's current director, has been both a Smartmatic and Sequoia employee [32].

However the most worrying aspect of this unresolved saga for US electors and authorities is not Blaine's conflict of interests and altogether untrustworthy character, nor the murky nature of Sequoia and Smartmatic deals. Rather, as content of ruling linked above shows [pages 13-14], it is the fact that Smartmatic software, written and produced in Venezuela by Smartmatic employees, is still in use:

"... Hart promises not to compete with Smartmatic in Latin America, the Philippines, and Belgium. In return, Smartmatic promises to grant to Hart a license to use its intellectual property currently found in Sequoia’s machines."

At oral argument, Hart’s counsel stated Sequoia currently uses that intellectual property pursuant to certain license agreements. The fact that Sequoia keeps using technology that does not perform adequately --jointly developed with Smartmatic-- in US electoral processes was confirmed by Marianna Cutter, Executive Assistant to Jack Blaine, CEO & President of Sequoia, in letter sent on behalf of Blaine to Chairman Neal [33]. Hence, how can the fact that triggered the initial CFIUS investigation by Rep. Carolyn Maloney, read involvement in US elections of a highly suspect firm set up with seed money from Hugo Chavez, be reconciled with Blaine's admission that Sequoia machines continue using technology developed in Venezuela?

Sequoia proudly boasted in his website "The company’s voting equipment is currently used by hundreds of jurisdictions in the United States throughout 17 states and the District of Columbia" [34]. That's about 34% of the US electoral map.

Smartmatic in Bolivia

In 2009, Smartmatic submitted a bid to provide biometric technology in Bolivia to build a new electoral roll. This bid was rejected by Bolivian electoral authorities in June of that year, for alleged involvement in fraudulent electoral processes in Venezuela [see exhibit below]. Official decisions notwithstanding, Smartmatic circumvented the hurdle by getting subcontracted -after bidding process ended- by the winning bidder, a subsidiary of NEC from Argentina [link]. Allegations of artificially inflating the roll, which grew from 3,891,397 to 5,138,583, were made against Smartmatic. More than 400,000 new voters were to be struck off subsequently, owing to irregularities [link].

Smartmatic does the Philippines

Smartmatic then popped up in the Philippines, in 2009, where it was granted an electoral contract, to run elections in 2010, worth $150 million. In this instance, the company is presented by Reuters as a “Barbados-based firm” [35]. The way in which the company was contracted draw much criticism, which has been duly published in the media [36, 37]. Upon conclusion of elections in 2010, Smartmatic officials were summoned before Filipino Congress to explain a number of irregularities occurred during the election [38]. Interestingly, Smartmatic licensed Precinct Count Optical Scans, or PCOS [39], from Dominion (another electronic voting company) [40]. Dominion announced the purchase of Sequoia -formerly owned by Smartmatic- on 4 June 2010 [41]. Dominion participation in elections in New York, in 2010, was deemed "a royal screw up" by Mayor Michael Bloomberg [link].

Smartmatic does Mexico

In November 2009, the Mexican press reported that Smartmatic -referred on this occasion as a Dutch company- had been awarded a $23 million contract for the provision of biometric technology [42]. A tender was organised by the Mexican government and the following companies submitted bids: Soltic, S.A. de C.V., Cosmocolor, S.A. de C.V., Mainbit, S.A. de C.V., Latin ID, S.A. de C.V., Smartmatic International Holding, B.V. e Image Tecnology México, S.A. de C.V. Smartmatic won the tender to provide such technology, despite having submitted the second highest bid. Smartmatic mislead Mexican authorities, by presenting itself as a Dutch company. At this point, Smartmatic had no track record of having been directly contracted to provide biometric technology anywhere in the world.

Smarmatic banned in Venezuela

As it turns, the Hugo Chavez regime recently published a list with details of 49 companies, and the chavistas behind them [link]. According to El Universal [link], it sits in all registries of Venezuela forbidding the said companies from trading their wares:

As can be seen, Smartmatic's CEO Antonio Mujica [link], has been banned to make further business with the Chavez regime. In light of this new development, and the way in which Smartmatic deals with criticism [link], will the same fate follow in other countries?

Income since 2004: +$300 million

While bidding in the Philippines, Smartmatic "submitted a duly authenticated certification from the Consejo Nacional Electoral (CNE) of the Venezuelan government indicating the amount of the contract as US$141,356,604.54" [link]. In addition to this, Smartmatic won a $150 million contract in the Philippines, another $23 million in Mexico, it remains to be known how much of the $21.6 million contract NEC got in Bolivia [link] ended up in Smartmatic's coffers, and another $4,692,117 in Zambia [link].

Implications

It is extremely worrying that a company funded with seed money from the Hugo Chavez regime has been selected to run elections in countries around the world. As can be gathered from press reports, Smartmatic is yet to run one electoral process, anywhere in the world, in which fraud allegations and irregularities have not been made. From Venezuela to the Philippines, from the USA to Mexico, every single contract awarded to Smartmatic has been marred with allegations of bribes, and corruption, and the company is yet to come out of the closet and present credible evidence that, indeed, it purchased from Hugo Chavez the 28% stake acquired originally through proxy Omar Montilla.

In addition, while the company is privately held, its actions do affect millions of people, and, possibly, outcomes of democratic elections in the countries where it operates. To date, only one technician -Leopoldo Gonzalez in Venezuela in Nov. 2005- has been given permission to conduct an audit on Smartmatic voting machines. In that occasion, Mr. Gonzalez was able to call out how each participant had voted in a mock election, done for audits purposes prior to legislative elections in Venezuela, in front of electoral observers from the European Union and from the Organisation of American States. Mr. Gonzalez revealed that the secrecy of the vote could not be guaranteed by Smartmatic machines [43]. This revelation prompted Venezuelan opposition parties to withdrew en masse, from legislative elections in December 2005. As noted above, similar allegations have been made in the Philippines.

So the question should be: is democracy better served by allowing opaque, privately-owned companies that refuse to meaningful scrutiny, to run elections?

Alek Boyd created Vcrisis.com and started blogging about Venezuela in Oct. 2002. Since, he has worked as an independent researcher, reporter, lobbyist, civil and political rights activist, and has experience in strategic and media consulting throughout Latin America. In 2006, Alek became the first blogger ever to shadow a presidential candidate in Venezuela. In 2009 he gained a MA (merits) in Spanish American Studies (King's College London). Alek can be contracted to do due diligence on individuals and companies in Venezuela and LatAm. Contact: @alekboyd, or alek dot boyd at gmail dot com.

Most of the investigations I've published in the last 10 years are related to individuals and companies with suspect connections to Hugo Chavez's regime, whose actions would've gone unnoticed otherwise. Exposing the $2-trillion dictator is no easy task, and so donations are always welcome.